Kansas City Fed Manufacturing Index Negative for the Fourth Straight Month in July
Summary
- Composite Index is at -11 in July, reflecting drops in production to -20 and new orders to -20 and a rebound in employment to a positive 4.
- Price indexes are mixed, w/ prices paid for raw materials rising to 9 and prices received for finished goods falling to -7.
- Expectations for future activity remain mostly flat, w/ employment expected to rise further.
The Kansas City Fed manufacturing composite index was at -11 in July, marginally up from -12 in June but down from -1 in May, the July Manufacturing Survey by the Federal Reserve Bank of Kansas City showed, indicating Tenth District manufacturing activity continued to fall this month. The latest reading was well below 13 in July 2022. “The pace of decline eased slightly for durable goods, while it stayed steady for nondurable goods,” the Kansas City Fed reported. The ISM-adjusted index calculated by Haver Analytics was at a contraction-level 45.9 (NSA) in July, slightly up from 45.2 in June but down from an expansion-level 50.9 in May, indicating a contraction in factory activity for the third time in four months. These ISM-adjusted figures were below 57.7 in July last year and a record-high 68.9 in March last year.
The production index dropped to -20 in July, the ninth contraction in 10 months at a more severe pace, from -10 in June; it was well below a positive 6 in July last year and a record-high 42 in March last year. The new orders index fell to -20 this month after holding at -14 in June, registering the 12th straight negative reading and down from zero in July 2022. A lessened 17% of respondents (NSA) reported orders gains while a steady 37% reported declines. The shipments index worsened to -24 this month after easing to -2 in June; it remained down from 7 in July last year and a record-high 43 in March last year. In contrast, the employment index recovered to 4 in July from -12 in June; however, it remained down from 16 in July last year. A higher 25% of respondents (NSA) reported increases in the number of employees while a lessened 16% reported decreases.
The raw materials inventory index rebounded to -10 in July, the fourth negative reading in five months, from a three-year low of -18 in June; these readings were below 20 in July 2022 and a recent-high 29 in March 2022. The order backlog index dropped to -38 this month, the 12th consecutive negative reading and the lowest since April 2020, after increasing to -14 in June; these numbers were significantly below 1 in July 2022 and a record-high 42 in July 2021. The supplier delivery time index increased to -6 in July, the fourth negative reading in five months, after falling to -8 in June; however, it was well below 22 in July last year and a recent-high 50 in March last year.
The prices received index for finished products fell to -7 in July, the third straight m/m fall to the lowest level since May 2020, from 3 in June. It was well below 35 in July 2022 and a record-high 60 in August 2021. A lessened 12% of respondents (NSA) reported higher prices received while an increased 16% reported price declines. The prices paid index for raw materials rose to 9 this month after falling to 4 in June; however, it was significantly down from 42 in July last year and a recent-high 77 in April last year.
Expectations for future activity stayed mostly flat, with employment activity expected to gain further, input prices to rise at a faster pace, and finished product prices to rise at a slower pace. The expectations index for six months ahead was at -2 in July, unchanged from June and marginally down from 2 in May. The expectations indexes for employment (17) and supplier delivery time (-5) increased in July, while those for shipments (-4), production (-1) and new orders (0) declined for the month. Expected raw materials inventories were unchanged at -23. The expectations index for raw materials prices rose to a three-month-high 23 in July after falling to 13 in June, while the index for finished goods prices fell to 13, the lowest reading since July 2020, from June’s 20.
The latest survey was conducted for a six-day period from July 19-24, 2023 and included 93 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.
The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver's SURVEYS database.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has ~20 years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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